Offshore Isle of Man Umbrella Companies are in the news due to the Chancellor’s Autumn Statement.
The Chancellor unveiled his new tax avoidance measures yesterday in the autumn statement. He says will net the government £9bn extra in taxes. However, he has made those predictions before and only managed to get a fraction of what he expected to get. Most contractors using offshore Isle of Man Umbrella Companies will not be hit.
There are two areas that the Chancellor is attacking as regards tax avoidance.
Intermediary Companies Legislation
Firstly, the Chancellor is targeting Intermediary Companies.
This is where UK companies register their UK employees as self-employed and pay them through Intermediary companies offshore. This saves the employer paying National Insurance on them.
Several hundred thousand construction workers are ’employed’ this way. It is the companies that get the main benefit. It is not something that affects most contractors in Offshore Umbrella Companies.
False Partnerships Crackdown
Secondly, the Government is going to crack down on what they see as false partnerships, i.e. those set up just to avoid tax. This may affect some Offshore Umbrella Company contractors, if the Isle of Man Umbrella Companies have set them up as partners. However, it is only a small percentage that are set up this way.
All that would happen here is that the offshore Isle of Man Umbrella Company owner would change to a new scheme that is legal and move their contractor over to it.
This legislation is not retrospective so there would be no legacy problems for contractors here. There will be no back payments that HMRC can claim. The very fact that they are changing the law on partnerships means that it was legal before. It will be legal right up to April 2014 when the contractors, presumably, will move to a new legal Offshore Umbrella Company scheme.
Government and HMRC
It would be different if the Government and HMRC fought a scheme through the courts and won. Then the contractors might have problems. However, the Government haven’t won many of these.
If the Government are to get anywhere near the £9bn that they expect to get then they are going to have to get it through the Intermediaries side of it. They may get some from onshore partnerships.
Offshore Isle of Man Companies
However, after this autumn statement those contractors using offshore Isle of Man Umbrella Companies can rest more easily. They weren’t in the Government’s line of fire this time around.
The vast majority of the offshore umbrella company schemes were legal and remain legal under current UK laws. If they do make them illegal, in the future, the legislation will not be retrospective. So, contractors whose schemes are made illegal will not lose out and have to pay back taxes.
For a list of legal Offshore Umbrella Companies you should click on Offshore Umbrella Company List
Applying for Contractor Mortgages
If you want to find out more see Specialist Contractor Mortgages
To apply for one of those specialist contractor mortgages see Contractor Mortgages Application